It features Martin Small, who's
responsible for more than $1 trillion as the firm's US head,
holding an electric guitar. And in between impressive displays of
shredding, Small makes an analogy between playing the instrument
and investing in ETFs.

The connection is simple: ETFs give people unprecedented
flexibility in creating portfolios, similar to how the chord
combinations afforded by the electric guitar revolutionized music
as we know it.

It's a fun three-minute segment - and that's the point. The video
is part of a concerted effort by iShares to educate the public on
ETF investing, with hopes they'll recognize its merits. And based
on a recent survey conducted by the provider, it's working,
especially with youngsters.

Roughly 42% of the millennials surveyed own ETFs, up
from 33% last year, the biggest jump out of any category,
according to a poll of more than 1,000 people conducted by
iShares. Further, 85% of millennials surveyed said they're
planning to buy ETF exposure in the next year.

These results would suggest that BlackRock and other fund
providers have successfully tapped into the millennial market -
the fastest-growing segment of the investment universe. So we
decided to ask Small to explain why.

'A natural level of comfort'

The first part of his explanation deals with how closely
intertwined the maturation of millennials has been with a period
of rapid growth for ETFs - a market that saw combined US assets
hit $3.3 trillion in November, a roughly $900 billion single-year
increase, according to Investment Company Institute
data.

Small points out that the funds have been around for as long as
young potential investors may have had an eye on the market.

"ETFs are about as old as the world wide web, so millennials grew
up with them," Small told Business Insider. "They've always been
around, so there's just a natural level of comfort."

ETFs have always kept their promises to millennials

The second relates to an unfortunate reality facing millennials:
they're the lowest-earning generation in modern history. This
means that they have less money to invest, and a lower cost
threshold when it comes to putting that capital to work. And
while these factors may initially seem like deterrants, Small
thinks cheap-by-comparison ETFs have actually been
well-positioned to help youngsters invest.

"It's a generation that's always had to do more with less," he
said. "With an ETF, you can put $100 to work if you want. There
are very few mutual fund complexes with minimum investments lower
than thousands of dollars."

Small also notes that ETFs have done an excellent job mirroring
the indexes or strategies they track.

"ETFs have always kept their promises to millennials," he said.
"They've always delivered the market return at low cost, and
that's earned a tremendous amount of trust."

Boomers have been slow to adopt ETFs, but they could be the next
frontier of growth

As millennials make up the driving force of ETF adoption, their
parents have been far more reluctant to take the plunge.

Only 27% of so-called "baby boomers" (aged 52-70) are invested in
ETFs, the lowest out of any group, according to the iShares
survey. Small says this is likely a byproduct of the huge sums of
money sitting stagnant in retirement accounts that haven't yet
been "ETF-ized," as he describes it.

He also thinks it's possible that boomers have been somewhat
spoiled by the ongoing equity bull market, which is now the
second-longest on record.

"They've seen some of the largest names in the market produce
super-normal returns," said Small. "That sense of being able to
beat the market overhangs some of their thinking. You see less of
that from the generations that are on either side."

ETFs are starting to become modular building blocks for retirees

But boomers are far from a lost cause, says Small. He points to
the surprising growth in adoption by the so-called "silvers"
group (aged 71+), of which 37% are invested in ETFs, almost
double the previous year.

That spike in adoption is likely a result of silvers increasingly
treating ETFs as viable retirement assets, says Small. And he
predicts that as boomers start to liquidate their retirement
accounts, their ETF adoption rates will see a similar surge.

"At the end of the day, ETFs are starting to become modular
building blocks for retirees," he said. "They're becoming
valuable retirement tools. It's a leading indicator of what we
could see from boomers in the future."